```

[Federal Register Volume 89, Number 241 (Monday, December 16, 2024)]
[Rules and Regulations]
[Pages 101466-101467]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-29059]

=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF COMMERCE

Minority Business Development Agency

15 CFR Part 1400

[Docket No. 241121-0298]
RIN 0640-AA02

Removal of Racial and Ethnic Presumptions in Response to Court 
Ruling

AGENCY: Minority Business Development Agency, Department of Commerce.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Minority Business Development Agency (MBDA) amends their 
regulations to remove the list of racial and ethnic presumptions in 
order to comply with the Court's decision in Nuziard et al v. Minority 
Business Development Agency et al., which struck down those racial and 
ethnic presumptions.

DATES: This rule is effective January 15, 2025.

FOR FURTHER INFORMATION CONTACT: Donald Smith, Chief Operating Officer, 
MBDA, [email protected].

SUPPLEMENTARY INFORMATION:

Background

    The Department of Commerce's Minority Business Development Agency 
(MBDA) derives authority from the Minority Business Development Act of 
2021 (``the Act''), 15 U.S.C. 9501, et seq., to appoint an Under 
Secretary of Commerce for Minority Business Development to carry out 
the Act's activities and initiatives. MBDA's mission is to promote the 
growth and global competitiveness of minority business enterprises 
(MBEs) in order to unlock the country's full economic potential. One of 
the ways MBDA accomplishes this mission is through the funding of a 
network of Business Centers, Specialty Centers, and other technical 
assistance programs to provide MBEs with business assistance services 
and resources.
    For a business to access MBDA technical assistance programs that 
serve MBEs, the individual seeking services must certify that their 
business is ``a business enterprise (i) that is not less than 51 
percent-owned by 1 or more socially or economically disadvantaged 
individuals; and (ii) the management and daily business operations of 
which are controlled by 1 or more socially or economically 
disadvantaged individuals.'' 15 U.S.C. 9501(9). ``Socially or 
economically disadvantaged individual'' is defined in the Act as ``an 
individual who has been subjected to racial or ethnic prejudice or 
cultural bias (or the ability of whom to compete in the free enterprise 
system has been impaired due to diminished capital and credit 
opportunities, as compared to others in the same line of business and 
competitive market area) because of the identity of the individual as a 
member of a group, without regard to any individual quality of the 
individual that is unrelated to that identity.'' 15 U.S.C. 9501(15)(A). 
Additionally, the Act contains a presumption in which ``the Under 
Secretary shall presume that the term ``socially or economically 
disadvantaged individual'' includes any individual who is-- (i) Black 
or African American; (ii) Hispanic or Latino; (iii) American Indian or 
Alaska Native; (iv) Asian; (v) Native Hawaiian or other Pacific 
Islander; or (vi) a member of a group that the Agency determines under 
part 1400 of title 15, Code of Federal Regulations, as in effect on 
November 23, 1984, is a socially disadvantaged group eligible to 
receive assistance.'' 15 U.S.C. 9501(15)(B). This presumption was also 
found in MBDA's regulations at 15 CFR 1400.1(b) and (c), and members of 
these racial groups are presumed to be eligible for MBDA assistance.

Court Decision in Nuziard

    The racial presumptions found in the Minority Business Development 
Act of 2021 and 15 CFR part 1400 were challenged in Nuziard, et. al. v. 
Minority Business Development Agency, et. al., in which the Court found 
any ``provision of the MBDA Statute that is contingent on the 
presumption in 15 U.S.C. 9501(15)(B)'' unconstitutional and prohibited 
MBDA from ``imposing the racial and ethnic classifications defined in 
15 U.S.C. 9501 and implemented in 15 U.S.C. 9511, 9512, 9522, 9523, 
9524, and 15 CFR 1400.1 .-.-. '' No. 4:23-cv-00278-P (N.D. Tex. March 
5, 2024). The court's injunction applies to the sections of the 
Minority Business Development Act and related regulations that require 
the Under Secretary of Commerce for Minority Business Development to 
presume that a ``socially or economically disadvantaged individual'' 
``includes any individual who is--(i) Black or African American; (ii) 
Hispanic or Latino; (iii) American Indian or Alaska Native; (iv) Asian; 
(v) Native Hawaiian or other Pacific Islander.'' 15 U.S.C. 9501(15)(B). 
Similarly, the Court enjoined the application of 15 CFR 1400.1(b) to 
the extent that it imposes racial and ethnic classifications, and 
designates ``Blacks, Puerto-Ricans, Spanish-speaking Americans, 
American Indians, Eskimos, and Aleuts'' as individuals who are socially 
or economically disadvantaged. Finally, the Court also enjoined 15 CFR 
1400.1(c), which designates ``Hasidic Jews, Asian-Pacific Americans, 
and Asian Indians'' as socially or economically disadvantaged.

Updating Regulations

    As a result of the Court's decision, MBDA is updating their 
regulations at 15 CFR 1400.1(b) and (c) to remove the sections that 
contain the racial presumptions described in the decision above. MBDA 
also proposes to make a correction to 15 CFR 1400.2(a) pertaining to 
the definition of minority business enterprise and where it is defined 
in the Act. The last change pertains to striking out outdated language 
referring to Executive Order 11625 in 15 CFR 1400.3 because MBDA draws 
statutory authority directly from the Act and not from the Executive 
Order. See 15 U.S.C. 9597. These changes will clarify the eligibility 
requirements to qualify for MBDA technical assistance programs that 
serve MBEs.

Classification

    Pursuant to 5 U.S.C. 553(a)(2), the provisions of the 
Administrative Procedure Act requiring notice of proposed rulemaking 
and the opportunity for public participation are inapplicable to this 
final rule because this rule relates to ``public property, loans, 
grants, benefits, or contracts.'' In addition, 5 U.S.C. 553(b)(B) 
exempts rulemakings from prior notice and public comment procedures 
when an agency finds for good cause that such procedures ``are 
impractical, unnecessary, or contrary to the public interest.'' Here, 
MBDA has determined that there is good cause and that providing prior 
notice and opportunity

[[Page 101467]]

for public comment is impractical because MBDA is required to amend the 
CFR to implement the holding in Nuziard. The court order requires MBDA 
to amend the CFR in a specific manner, and there are no alternative 
ways to make the change other than as implemented in this final rule. 
Therefore, this final rule is being issued without notice and comment.
    This rule has been determined to be not significant for purposes of 
Executive Order 12866.
    Because a notice of proposed rulemaking and an opportunity for 
public comment are not required to be given for this rule by 5 U.S.C. 
553, or by another law, the analytical requirements of the Regulatory 
Flexibility Act, 5 U.S.C. 601, et seq., are not applicable. 
Accordingly, no regulatory flexibility analysis is required and none 
has been prepared.
    This rule does not have any collection of information requirements 
under the Paperwork Reduction Act.

List of Subjects in 15 CFR Part 1400

    Federal financial assistance, technical assistance, administrative 
practice and procedure.

    Dated: December 5, 2024.
Eric J. Morrissette,
Deputy Under Secretary of Commerce for Minority Business Development, 
Performing the delegated duties of the Under Secretary, Minority 
Business Development Agency, U.S. Department of Commerce.

    For the reasons set out in the preamble, MBDA amends 15 CFR part 
1400 as follows:

PART 1400--DETERMINATION OF GROUP ELIGIBILITY FOR MBDA ASSISTANCE

0
1. The authority citation for part 1400 continues to read as follows:

    Authority:  15 U.S.C. 1512, E.O. 11625, 3 CFR 616 (1971-75), 36 
FR 19967 (1971); and E.O. 12432, 3 CFR 198 (1983), 48 FR 32551 
(1983).

0
2. Revise and republish Sec.  1400.1 to read as follows:

Sec.  1400.1  Purpose and scope.

    (a) The purpose of this part is to set forth regulations for 
determination of group eligibility for MBDA assistance.
    (b) In order to be eligible to receive assistance from MBDA funded 
organizations, a concern must be a minority business enterprise as 
defined in 15 U.S.C. 9501(9). The purpose of this regulation is to 
provide guidance to groups not previously designated as eligible for 
assistance who believe they are entitled to formal designation as 
``socially or economically disadvantaged.'' Upon adequate showing by 
representatives of the group that the group is, as a whole, socially or 
economically disadvantaged, the group will be so designated and its 
members will be eligible for MBDA assistance. Designation under this 
regulation will not establish eligibility for any other Federal or 
Federally funded program.

0
3. In Sec.  1400.2, revise paragraph (a) to read as follows:

Sec.  1400.2  Definitions.

* * * * *
    (a) Minority business enterprise is defined in 15 U.S.C. 9501(9).
* * * * *

Sec.  1400.3  [Amended]

0
4. In Sec.  1400.3:
0
a. Remove ``Executive Order 11625'' and add in its place ``this part'' 
in the introductory text; and
0
b. Designate the parenthetical following paragraph (d) as note 1 to 
paragraph (d) and remove the parentheses.

[FR Doc. 2024-29059 Filed 12-13-24; 8:45 am]
BILLING CODE 3510-21-P
```